TCL expects a troubled last quarter as sales dive

Mainland figures fall 58 per cent year on year in November, while stock drops

China's second-biggest mobile handset maker, TCL Communication Technology Holdings, expects to post a fourth-quarter loss due to plunging domestic sales last month.

The company, which previously announced its third quarter had been 'tough', said November unit shipments for the mainland market had dropped 58 per cent to 363,115 units from a year ago.

'The group may continue to record a loss for the fourth quarter' to December 31, the company said in an announcement yesterday.

Shares of TCL Communication fell as much as 10.6 per cent to an intraday low of 59 cents. The counter closed down 6.06 per cent to 62 cents, against a historical high of $1.42 in September when it listed on the main board.

Its A-share parent TCL Corp lost 6.41 per cent to 3.65 yuan on the Shenzhen Stock Exchange.


Analysts had expressed concerns over local handset makers, reeling from weak sales and excessive inventory while facing increasing competition from foreign counterparts such as Nokia and Motorola.

A poll by Thomson First Call of four brokerages had a consensus of 'underperform' for TCL Communication.

'Based on the figures of TCL's unit shipment, we expect the price competition in China's handset market will continue,' said Sun Hung Kai analyst Niki Chu Hung, who had a 'sell' recommendation on the stock.

TCL Communication was expected to see net profit drop 61.8 per cent to $298.19 million from $780.75 million last year, while sales would fall to $7.86 billion from $8.98 billion previously, according to Thomson First Call's estimates.


'The outlook for the local Chinese handset industry is gloomy,' Goldman Sachs analyst John Tang said in a recent report. '[Research and development] deficiencies and cost disadvantages have become major issues for local handset players in 2004.

'We believe foreign competition will continue to escalate, and the potential [third-generation mobile service] rollout in 2005 may trigger a major industry shakeout in China's handset sector,' Mr Tang wrote.


TCL Communication yesterday said Wan Mingjian had resigned as chief executive for health reasons with effect from December 19, but he would remain as executive director.

He had also quit as general manager of TCL Mobile and chief executive of TCL's mobile-phone venture with Alcatel.

TCL Communication had appointed George Guo Aiping, an executive director and chief operating officer, as its managing director with effect from December 19.


'We believe the departure of Mr Wang will not have much effect on the future development of TCL Communication,' Ms Chu said.